E.ON, Germany's biggest energy group, agreed yesterday to sell off its transmission grid in a deal worth billions of euros that is designed to bring to an end its long-running competition battle with the European commission and avoid huge fines.

Its shock move enraged the German government and could herald the break-up of other big continental energy groups suspected of using their muscle to manipulate prices and prevent rivals from entering a more competitive market.

The decision delighted Britain and its allies as well as the commission. Eluned Morgan, Labour MEP, said E.ON's move would put pressure on other companies to follow suit. "At last these monolithic companies are responding to public pressure, which is losing patience with these public utilities. For years consumers have seen their prices go up whilst shareholders are lining their pockets with excessive profits," he said.

But Germany's deputy energy minister, Peter Hintze, said: "It's very astounding. The timing coincidence of these events ... It's a very questionable game."

E.ON's deal with the commission came as the EU's 27 energy ministers held a rowdy meeting - said by participants to be highly charged - that scuppered Franco-German plans to water down the proposals for unbundling energy groups. The French and Germans had suggested allowing an independent agency to control investment plans. "We've seen this off," jubilant British officials said.

Ofgem hailed the E.ON climbdown as great news for British consumers. It "makes it very difficult for the other large energy companies to argue for retaining control of their transmission businesses," the regulator said.

The commission and E.ON jointly said the group had proposed selling off its electricity networks to an operator that would have no interest in generation or supply, and divest 4,800 megawatts of generating capacity - the equivalent of half a dozen mid-sized power plants - to rivals.

Reports in Germany indicated that E.ON could sell its grid operations to a financial investor rather than an overseas group, with the government ruling out in advance any offer from Russia's Gazprom.

Britain's cash-rich National Grid refused to comment on whether it could buy E.ON's grid network, but said its strategy was focused on the UK and US. Nick Winser, executive director for transmission, said: "Ownership unbundling has always been the best solution. It allows open access to the transmission networks, increases investment and competition, and benefits customers across Europe."

The commission is examining E.ON's proposal to settle its long-running anti-monopoly case in electricity. It said it would drop its two cases against the firm if the final details of the proposal were approved but would pursue other companies in the energy sector in a clear warning to France's EDF and Germany's RWE.

But Hintze insisted that Germany was sticking to its plan to press for an alternative to company break-ups even if its four biggest energy groups all divested their grids. He claimed the plan had won even more support yesterday, expanding the blocking minority of eight, although that was disputed by the energy commissioner, Andris Piebalgs.

Germany's fourth-largest energy provider, Vattenfall, said it could sell off its grid but RWE, the second-largest, and EnBW, the third-biggest, rejected the idea outright.